Cash logistics metals and the specie market

08 November 2016

Six months on from our last market update the mergers in the market have slowed. Whilst we have seen less merger and acquisition (M&A) activity in the past six months, at the time of going to press Sompo has confirmed is has made a USD 6.3 billion bid for Endurance.

This follows on from their acquisition of Canopius in 2014. This is the third multi-billion dollar acquisition by Japanese insurers in the last 24 months. This acquisition follows on from the purchase of Kiln by Tokio Marine and the acquisition of Amlin by Mitsui Sumitomo. Clearly big M&A opportunities remain on the table within the insurance sector.

Current market conditions remain extremely competitive with insurers continuing to compete in what is the most competitive marketplace for many years.
Insurance market capacity continues to grow and the appetite of insurers continues to evolve and adapt to their customer needs. The underwriting trend seems to be very much focussed around portfolio underwriting and aligning portfolios of business with those brokers that have a clear focus within this specialist sector. 

The overall specie sector continues to make money for the insurance market as a whole. We are still seeing plenty of activity with new insurers entering the marketplace and further discussion with existing insurers about expanding into the specie arena. There are several reason for this, a common reason is London insurers are enhancing their underwriting offering as a whole and specie plays an integral part of this overall offering. Specie is traditionally short-tail business which can offer investors a relatively quick return.

From a market trending standpoint, the sector has not been without its losses during the past six months. Latin American and Brazil in particular have been active in terms of loss events. This has been a trend over a number of years, but it has increased in Brazil over the last 24 months and has further intensified in the past six months. Having said this we are still firmly of the belief this is a great time to be a consumer in this marketplace as the choice the customers have is greater than it has been for many years.

The experience of the insurers remains excellent with several insurers providing strong and growing underwriting capacity. These insurers are also adequately supported by claims adjusting capabilities, something that is fundamental for insurers to continue to invest in, if they are going to take leading positions on client’s policies.

Capacity within the insurance marketplace is growing and is now excess of USD 2.5 billion. This is spread between 40 to 50 insurers. A few Insurers can now offer upwards of USD 200 million any given risk. However the majority of insurers offer capacity in the region of USD 50 million any given risk.

In London the preference of insurers is for a subscription market, , with each Lloyd’s syndicates taking a share of the risk, however we are seeing a number of syndicates that want to take larger and larger proportions of any given risk. Outside of London the preference of the insurer is to take 100% of a primary layer (USD 5 million – USD 10 million).

The insurance market remains exceptionally competitive. It is a great time to challenge your broker and representatives as pricing improvements are undoubtedly achievable. However coverage enhancements and added protections may be the smarter way to consider protecting your business in this competitive environment. Some coverage which was not obtainable 12 months ago, may very well be obtainable now, as long as you have the right advisor and strategy.

For further information, please contact Barry Vickery, Senior Partner on +44 20 7528 4598 or email barry_vickery@jltgroup.com


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Senior Partner, Specie Fine Art and Jewellery